By John Kemp
LONDON May 15 Texas may fall behind states such
as Louisiana in enhanced oil recovery (EOR) and carbon capture
and storage (CCS) projects, even though it has some of the best
geological potential in the United States, unless it enacts a
law allowing compulsory unitisation of oil fields.
Texas is the only major oil and gas-producing state without
provisions for compulsory unitisation - a mechanism that allows
petroleum production to be managed on a field-wide basis if
enough mineral rights owners vote to pool their interests and
It leads the country in enhanced oil recovery projects
employing CO2 injection from natural sources. Operators inject
more than 1.6 billion cubic feet of CO2 from natural sources
into the state's Permian Basin oil fields to produce an extra
170,000 barrels per day of oil.
Now operators want to use manmade CO2 as well.
Legislation introduced in the Texas House of Representatives
during the current session would have provided for compulsory
unitisation to support operations intended to increase the
ultimate recovery of oil and gas, including EOR and CCS, if at
least 70 percent of mineral rights owners agreed.
It ran into opposition, however, from farming interests,
environmentalists and small independent mineral rights owners,
who objected that they could be forced to contribute to the
upfront costs of unified field development, when it may take
years for those capital costs to be paid back.
The Oil and Gas Majority Rights Protection Act (HB 100), and
a companion measure introduced in the state Senate (SB 136),
died in committee, leaving the future for large-scale EOR-CCS
projects in Texas uncertain.
Companies wanting to inject manmade carbon dioxide (CO2)
underground, as well as environmental regulators, need
assurances it will stay there forever and not be released back
into the atmosphere.
"To monitor and verify there is no unanticipated migration
from an oil recovery/sequestration project, the project sponsor
must have control of the entire area of the reservoir,"
according to the Texas Energy Foundation.
"Without a state unitisation procedure, carbon dioxide
venting is likely, and industrial sources will not send their
CO2 to such fields because of legal exposure and the potential
for violation of CO2 emission rules," the foundation concluded
in a recent report ().
CCS AND EOR AS COMPLEMENTS
For CCS to occur on a large scale, it needs to capture the
enormous but dilute CO2 emissions produced by power plants,
concentrate them, then inject the relatively pure CO2 into salty
aquifers deep underground.
The FutureGen project in Illinois, backed by the U.S.
Department of Energy, is trialling this approach. But no one has
yet achieved CCS on a utility scale from a regular power plant
in commercial operation.
CO2 accounts for just 7 to 10 percent of the exhaust gases
in a typical power plant, and the costs of separating and
concentrating it from other exhaust gases remain prohibitively
high, though the Department of Energy is spending heavily on
research into ways to make the process more efficient.
Attention has turned to capturing the CO2 produced by
industrial processes, such as production of hydrogen, and
injecting it into depleted fields to recover some of the oil and
gas that would otherwise be left behind by ordinary production
methods. The Energy Department is promoting this approach as
carbon capture, utilisation and storage (CCUS).
CO2 is already fairly concentrated in the exhaust gases of
some industrial processes, so it needs less purification. Rather
than being pumped uselessly into briny aquifers, the CO2 is used
to produce valuable oil and gas. In this form, it has commercial
value, which helps offset some or all of the costs incurred in
separating and transporting it.
Ironically, many potential EOR projects are currently
stalled because there is not enough liquid CO2 from natural
sources available and it is expensive. CCS from industrial
processes could solve the problem. CCS and EOR projects are
PIONEERING DENBURY RESOURCES
CCS-EOR is being pioneered by Denbury Resources.
Denbury is already one of the largest independent oil and
gas producers in Mississippi and Montana. It makes extensive use
of CO2 injection to boost oil recovery at a number of fields.
So far all the CO2 has come from natural sources, where it
is extracted from underground reservoirs such as Jackson Dome,
Mississippi. Denbury has a controlling interest in every known
CO2 producing well in the Gulf Coast region, according to its
But the company also has signed long-term contracts to
purchase waste CO2 from six industrial plants in the Gulf Coast
region currently under construction.
It is also negotiating with the operators of existing
facilities that producer smaller and less concentrated CO2 waste
CO2 MIGRATION AND SAFEGUARDS
Once CO2 is injected into a formation, whether it is a salt
water aquifer or a depleted oil and gas field, it can migrate
throughout the reservoir.
Every well in the reservoir can potentially benefit from CO2
injections intended to enhance oil and gas recovery, which poses
a free-riding problem unless the reservoir is unitised.
Equally, CO2 injected into one well as part of an EOR
project may be released from another in the same formation along
with the oil and gas unless measures are taken to strip it from
the oil and gas and reinject it.
CO2 injection needs to be managed on a field-wide basis,
especially if credits are being claimed for CCS.
HB 100 would have allowed the Texas Railroad Commission,
which regulates petroleum production in the state, to impose
compulsory unitisation on all wells and minerals rights owners
in a common reservoir for the purpose of increasing ultimate oil
and gas recovery by waterflooding, repressurising and tertiary
recovery (including CO2 injection).
The Commission would have been able to act on an application
from an owner of a working or royalty interest only after
attempts to reach a voluntary agreement had failed and at least
70 percent of the working interest and rights holders had
TEXAS UNITISATION DEBATE
Denbury testified before the Energy Resources Committee of
the Texas House of Representatives in favour of the unitisation
The Texas Oil and Gas Association and the Texas Alliance of
Energy Producers also testified positively, and Occidental
Petroleum and Chevron backed the measure,
according to committee records.
But the bill was opposed by representatives from the Texas
land and mineral rights association, the National Association of
Royalty Owners (NARO), Texas Farm Bureau, Texas and Southwestern
Cattle Raisers Association, Plains Cotton Growers, Exotic
Wildlife Association and other farming and conservation
Farmers worried about schemes that could include hydraulic
fracturing and add to pressure on water supplies. Green groups
opposed any increase in production of fossil fuels and the risk
Compulsory pooling and unitisation provisions were first
introduced in other parts of the United States in the 1940s and
1950s and are now in force in all major oil and gas producing
states (including North Dakota, Kansas, Kentucky, Tennessee,
Oklahoma and California) and common internationally (for example
the United Kingdom).
Compulsory unitisation remains taboo in property-rights
loving Texas, though it is debatable whether Oklahoma and
Alabama (which have had compulsory unitisation since 1945) and
Tennessee (since 1984) are really hotbeds of socialism.
With the Texas legislature coming to the end of its
once-every-two-years session, compulsory unitisation provisions
cannot now be enacted until at least 2015.